OTTAWA (Reuters) – Growth in Canadian manufacturing sales slowed in April and productivity came in lower than expected in the first quarter, hardening expectations that second-quarter economic growth will be less robust than in the previous two quarters.

Statistics Canada reported yesterday that higher prices for primary metals pushed manufacturing sales up 0.2 percent in April from March, slightly below expectations and sharply below the 1.4 percent growth the previous month.

In volume terms, factory sales slipped 0.1 percent.

"Accordingly, lower volumes of manufacturing shipments translate into the first manufacturing drag on the Canadian economy in eight months with negative connotations for April GDP growth," said Scotia capital economists Derek Holt and Gorica Djeric in a note to clients.

However, the economists do not see the start of a weakening trend in the economy or consider the news bad enough to prevent the Bank of Canada from raising interest rates in July and later in the year. "We do not think the Bank of Canada will be swayed by this report," they said.

The central bank hiked rates by a quarter point on June 1 and markets have priced in about an 85 percent chance of a similar increase on July 20, according to the yields on overnight index swaps. Another Statscan release yesterday showed a disappointing 0.7 percent rise in labour productivity in the first quarter, a weaker performance than expected as growing employment led to a surge in the number of hours worked.

Markets had expected a 1.2 percent increase in productivity, a measure of economic output per hour of labour, following a gain of 1.2 percent in the fourth quarter.

Productivity in Canada lags that in the United States and increasingly has become a concern for policymakers as an ageing workforce and a shrunken manufacturing base limit the economy's ability to create wealth in the long term.